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12 Best & Worst Broker-Dealers: Q1 Earnings, 2014

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Several (but not all of the) major stock indexes recovered in the first quarter of 2014 after a weak start to the year. Many broker-dealers that help investors purchase equities and bonds generally benefited from the market’s upswing.

Still, there were some notable winners and losers in the group, with several affected by legal issues and expenses, as in recent periods.

Overall, earnings for firms in the financial industry/sector – as tracked by Reuters – rose about 17% in Q1’14. The five-year EPS for the group is averaging 25%.

(Related ThinkAdvisor story: 12 Best & Worst Broker-Dealers: Q4 Earnings, 2013)

The group’s positive results in the quarter have helped push the Select Sector Financial SPDR ETF (XLF) up about 2% so far this year.

Read on to see which 12 broker-dealers outperformed the financial industry’s average EPS growth rate – and which ones underperformed.


Brian Moynihan, President and CEO of Bank of America. (Photo: AP)

12th Place


Bank of America lost $276 million in the first quarter of 2014, compared to net income of $1.5 billion, a year ago. In addition, revenue (net of interest expense) declined 3% year over year to $22.8 billion.

The company—led by Brian Moynihan—notes that these results include $6.0 billion in litigation expense related to a settlement with the Federal Housing Finance Agency and additional reserves tied to legacy mortgage-related matters.

BofA’s Global Wealth and Investment Management unit, which includes Merrill Lynch and U.S. Trust, had revenues of $4.55 billion, up about 3% from the year-ago quarter and a 1.6% improvement from Q4’13.

The number of Merrill Lynch financial advisors, though, dropped by 47 to 13,725,  primarily driven by the continued attrition of underperforming advisor trainees in its Practice Management Development program, according to the firm.

FA productivity, or yearly fees and commissions, stands at $1.3 million per experienced advisor; total FA productivity is roughly $1.06 million as of Q1’14, up from $1.04 in Q4’13 and $971,000 in Q1’13. “As of March, 45% of our advisors had 50% or more of their client assets under a fee-based relationship,” the bank said in a statement.

JPMorgan's New York headquarters. (Photo: AP)

11th Place


JPMorgan Chase reported first quarter earnings of $5.3 billion, a 19% drop from a year ago. The bank earned $1.28 a share compared with $1.59 in Q1’13. Revenue fell 8% from last year’s first quarter to $23.9 billion.

The firm’s fixed-income revenue of $3.8 billion was down 21% from a year earlier. Consumer and community banking also had a decline in sales; net revenue tied to these operations fell $1.2 billion, or 10%, to $10.5 billion.

Plus, mortgage loan originations of $17 billion were 68% off of Q1’13 and 27% from the prior quarter.

In other financial results, JPMorgan said it set aside $850 million for credit losses, up from $617 million a year earlier. “It’s not going to affect the underlying business,” said CEO Jamie Dimon, who added that the legal settlements similarly had not appeared to harm the bank’s reputation.

JPMorgan says its asset-management operations include 2,925 advisors, up from 2,797 a year ago but down from 2.962 in the prior quarter. The units profit margins fell to 26% from 29% in both the year-ago and prior periods.

Lloyd Blankfein, right, CEO of Goldman Sachs walking past the NYSE. (Photo: AP)

10th Place


Goldman said its Q1’14 net income fell about 11% to $1.95 billion, or $4.02 per share, from $2.19 billion, or $4.29 per share, in the year-ago period. Total net revenue dropped 8% to $9.33 billion.

“Investment Banking and Investment Management generated solid results, while market sentiment shifted throughout the quarter, constraining client activity in various parts of our franchise,” Chairman and CEO Lloyd Blankfein said in a statement.

Goldman’s revenue from fixed income, currency and commodities (FICC) trading decreased 11% year over year to $2.85 billion. Its debt-underwriting revenue fell 5% to $660 million. Revenue tied to investing and lending, though, weakened 26% percent to $1.53 billion.

Investment management revenue jumped 20% to $1.57 billion, though, and equity underwriting revenue rose 12% to $437 million.

Analysts point out that this is the bank’s fifth consecutive year of declining revenue. In 2009, fixed-income trading represented over 40% of total sales.

Mark Casady, CEO of LPL Financial.

9th Place


LPL Financial’s net income in the period ending March 31 fell about 3% year over year to $53.1 million, though net revenue jumped close to 12% to nearly $1.1 billion. Adjusted earnings, though, rose 4% to $71 million, or $0.69 per share. Higher costs and lower recruiting results in the period were cited as reasons for the recent performance, and the company’s executives—led by Mark Casady—are upbeat on results for the rest of 2014.

The independent broker-dealer’s core general and administrative expenses were $162 million, up 11% year over year (but down 3% sequentially). Also during the quarter, the company’s payout ratio to advisors grew 38 basis points to 86.4%.

The company has 13,726 affiliated advisors, up from 13,673 in Q4’13 and 13,377 in Q1’13. Advisory and brokerage assets rose to $447.1 billion, a 13.5% year-over-year increase, in the latest period.  

Average fees and commissions per rep are about $252,000 vs. $254,000 in the prior period and $230,000 a year earlier. Average commissions as of Q1’14 stood at $156,000; excluding alternatives, this figure is $152,000, which represents a 4% jump from last year and a 1% increase from the prior period.

Assets under custody on its independent-RIA platform grew nearly 50% to $69.6 billion from $46.7 billion last year. These results include 265 independent RIA firms, compared with 199 independent RIA firms 12 months earlier.

The company says its fee-based business generated $4.4 billion in net new advisory assets. Average assets managed by advisors jumped 13.5% to $33 million per rep vs. $29.5 million a year ago.

Micael Corbat, Citigroup CEO. (Photo: AP)

8th Place


First-quarter net income at Citigroup rose 3.5% to $3.94 billion, or $1.23 a share, from $3.81 billion, or $1.23, a year earlier. Excluding accounting charges and a tax item, profit was $1.30 a share, beating estimates.

Profit was boosted by improving results in a portfolio of unwanted assets the bank has marked for sale. Plus, losses in the Citi Holdings unit fell to $284 million in the first quarter from $804 million a year earlier, as mortgage results improved. Revenue at the division rose 61% from a year earlier to $1.46 billion.

Total revenue for the quarter, though, fell 1% year over year to $20.1 billion as expenses also decreased 1% to $12.1 billion.

Earlier this year, Citigroup, which is led by Michael Corbat, failed an annual stress test administered by the Federal Reserve, which cited deficiencies in the bank’s ability to project revenue and losses in its global operations. Regulators rejected the firm’s request to quintuple its dividend and repurchase $6.4 billion of shares.

Sergio Ermotti, CEO of UBS. (Photo: AP)

7th Place


UBS reported that its first-quarter profits improved about 7%. It had net income of 1.05 billion Swiss francs, or about $1.2 billion, vs. 988 million Swiss francs a year ago. The company’s revenue in Q1’14 was about $7.23 billion, a drop of roughly 7% from last year. It is led by Group CEO Sergio Ermotti.

Wealth Management Americas had a pre-tax profit of $272 million, up 7% from the prior period and 30% year over year; after adjustments, the pre-tax profit for Q1’14 was $284 million. The group’s advisor headcount is 7,113—down slightly from 7,137 in Q4’13 and up 1% from 7,065 in Q1’13.

Revenue for the U.S.-based unit was about 1.66 billion Swiss francs—about $1.9 billion, down slightly from 1.67 billion a year ago. Net new money during the most-recent period was $2.1 billion vs. $4.9 billion last year.

Invested assets per financial advisors increased to $139 million, up 2% from $136 million in Q4’13 and up 10% from $126 million in Q1’13. Annualized revenue per financial advisor stands at roughly $1,037,000 vs. $1,042,000 in Q4’13 but up 8% from $961,000 in Q1’13.

John Stumpf, CEO of Wells Fargo. (Photo: AP)

6th Place


Wells Fargo said its first-quarter net income rose to $5.9 billion, or $1.05 per share, up nearly 14% from $5.2 billion, or $0.92 per share, a year ago.

Its wealth-management, though, grew net income 41% year over year to $475 million. Revenues increased 8% from a year ago to about $3.5 billion, thanks to “strong growth in asset-based fees and higher net interest income,” the company says.

Compared to the four quarter of 2013, the Wealth, Brokerage and Retirement group’s net income actually declined by $16 million, or 3%, though its revenue grew $30 million, or 1%. In Q1’14, higher asset-based fees “were largely offset by lower gains on deferred compensation plan investments,” the bank says.

Wells Fargo Advisors had client assets of $1.4 trillion, up 8% from the prior year and slightly from the prior quarter’s $1.2 trillion; managed-account assets increased $63 billion, or 19% year over year. Average loan balances jumped 23% from a year ago.

In Q1’14, the group included 15,146 registered reps—down 134 from the prior quarter. The number of its licensed bankers, though, grew by 22 to 3,350. The number of correspondent clearing firms stands at 76, a drop of two from the earlier period.

James Cracchiolo, Ameriprise CEO

5th Place


Ameriprise Financial, led by Jim Cracchiolo, reported first-quarter net income of $401 million, or $2.01 per share, up 19% from $336 million, or $1.58, a year ago. Operating net revenues increased 8% year over year to $2.8 billion, driven in part by strong fee-based business growth from client net inflows and increased client activity, the company says.

The number of advisors in the group totals 9,704—down 12 from the prior quarter and 73 from a year ago: 2,155 reps are employee advisors, while the remaining 7,549 are independent.

Average annualized fees and commissions per advisor stood at $454,000, a jump of 15% from last year’s $395,000. Mutual fund wrap flows for the wealth group were $4.2 billion vs. $4.1 billion a year ago.

Pre-tax operating earnings from the Advice & Wealth Management and Asset Management units grew 36% to $364 million. Wealth management results expanded 39% to $181 million on sales of $1.15 billion, up 13% from a year ago. The unit’s pre-tax margin rose to 15.8% from 12.8% in the first quarter of 2013.

Paul Reilly, CEO of Raymond James Financial.

4th Place


Raymond James Financial reported net income of $104.6 million, or $0.72 per share, in the quarter ended March 31—up 31% from a year ago. Revenue was $1.2 billion, a 3% jump from a year ago, for the firm, which is led by Paul Reilly.

The firm’s Private Client Group reported a 44% jump in pre-tax profits from a year ago and an 8% sequential jump to $77.1 million. PCG revenue totaled $814.7 million, a 12% year-over-year gain and a 5% jump from the prior quarter.

Total assets under administration for PCG as of March 31 were $434 billion for the unit. Fee-based assets reached $158 billion, or close to 37% of client assets.

The total number of advisors in the PCG stood at 6,202 as of March 31 vs. 6,178 on Dec. 31 and 6,165 a year ago. The firm’s U.S.-based independent channel includes about 3,288 FAs, while its U.S.-based employee channel has 2,438. 

James Gorman, CEO of Morgan Stanley. (Photo: AP)

3rd Place


Morgan Stanley’s first-quarter net income grew 56% year over year to $1.51 billion, or $0.74 per share, from $962 million, or $0.48 cents. Excluding an accounting gain tied to the firm’s debt, profit from continuing operations totaled $0.68 cents a share, topping estimates.

Pre-tax income from global wealth management rose 16% to $691 million; after-tax income was $423 million, and total revenue was $3.62 billion. Total client assets stood at $1.94 trillion, up from $1.91 trillion in the earlier quarter and $1.79 trillion in the year-ago period.

The division’s reported a pre-tax profit margin of 19% for Q1’14. Morgan Stanley has raised its targets for the wealth-management unit’s profit margin, aiming for 25% by late 2015.

In the most recent quarter, Morgan Stanley—led by James Gorman—had 16,426 advisors, unchanged from the prior quarter. These reps had average yearly fees and commissions (or production) of $881,000.

Ronald Kruszewski, CEO of Stifel Financial.

2nd Place


Stifel Financial had a 224% boost in net income to $47.4 million from $14.6 million a year earlier. Its earnings per share rose about 200% to $0.72 from $0.24. Net revenues at the firm, led by Ronald J. Kruszewski, were $546.7 million, up 25% year over year.

Global Wealth Management boosted its net revenues 11.3% to nearly $300 million. Its pre-tax operating income was $79.7 million, compared with $69.5 million in the first quarter of 2013 and $79.0 million in the fourth quarter of 2013.

Private Client Group sales were about $263 million, an 8% year-over-year improvement. Remaining wealth-management revenues came from Stifel Bank.

PCG operations include 2,081 advisors, up from 2,077 in Q4’13 and 2,063 a year ago. Client assets total $168.4 billion vs. $166 billion in the prior quarter and $147 billion a year earlier.

BESTPhillip Frost, CEO of Ladenburg Thalmann

1st Place


Ladenburg Thalmann Financial Services, the parent company of Securities America, had the biggest percentage increase, though its actually profits were small compared some other broker-dealers. Ladenburg said its net income soared to $1.1 million, or $0.01 per share, in the first quarter from $100,000, or $0.00 per share, in the year-ago period — meeting estimates.

First-quarter revenues were $211.8 million, a 13% increase from revenues of $187.3 million in the first quarter of 2013. These results beat analysts’ estimates of $204 million.

The Independent Brokerage and Advisory Services unit, which includes independent broker-dealers Securities America, Triad and Investacorp, had sales of $211.8 million, up from $187.2 million a year ago. The unit’s net income grew to $4.3 million from $136,000.

Recurring revenues, which consist of advisory fees, trailing commissions, cash sweep fees and certain other fees, represented about 69% of revenues for the unit vs. roughly 65% in the prior quarter and about 64% in the year-ago period.

“Ladenburg’s independent broker-dealer business benefited from strong recruiting activity in the first quarter. Growth in commissions, advisory fees and investment banking activity helped drive performance across the firm,” explained President & CEO Richard Lampen, in a statement.

Securities America, which has more than 1,700 affilated advisors and $50 billion in client assets, recently hired Joel Triemstra to become a regional director of branch office development. The IBD says Triemstra will help the recruiting team manage “the increasing pipeline of prospective advisors considering joining” it.

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